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Downtown Showdown

Preservationists square off with a developer over a residential high rise building

By William Dean Hinton

IN THE EARLY 1980s, a parking lot operator named Al Schlarmann saw an opportunity to build a five-story parking structure on a choice piece of real estate on Second Street, across the road from what is now Zanotto's Market and the Improv Comedy Club. The property he wanted to build on was owned by the city of San Jose in a part of downtown called Fountain Alley, so named for a long-gone fountain that tapped into artesian wells flowing underground.

Seeing parking as a major long-term need, city officials signed an agreement with Schlarmann so he could pursue the parking structure. By 1985, Schlarmann had completed the financing for his deal, had engineering and architectural sketches drawn and was ready to pull permits. City Hall, however, had other ideas.

City officials decided they didn't want a parking structure built after all. At first their excuse was they didn't want to build on the lot while the light rail line was being installed. "The impact on the merchants would be too severe," Schlarmann says. City officials eventually began musing about other possibilities for the property.

Schlarmann's company, San Jose Parking, sued for $8.5 million in lost fees it would have accrued had the parking structure been built. As a result of the lawsuit, San Jose Parking was awarded about $1 million in 1997 and also given another 10 years to try to develop the lot. San Jose Parking also has an option to purchase the land for $3.5 million, an option for which it pays the city's Redevelopment Agency $25,000 per year. The deal is set to expire Feb. 6, 2007.

Several years ago, Schlarmann was surprised to find the Redevelopment Agency had double-crossed him again by signing a deal first with a New York-based developer to build a $500 million mixed-use development, including hotel, office and condo space, then with a Hollywood developer to build a $200 million apartment and condo complex, complete with underground parking, restaurants and shops. Both of those developments would have generated multimillion-dollar city subsidies.

Schlarmann, who is now 73, said he spoke with former Redevelopment Agency director Susan Shick about putting in a high-rise condominium, but she ignored him. "The only thing she was interested in was buying me out," he says. "She took the position that our deal was worth nothing. That makes it pretty tough."

San Jose Parking filed suit, claiming breach of contract, but Shick, an attorney, had a strategy of her own. She filed an eminent-domain action against the parking lot, one of a handful of attempted property seizures Shick became known for.

San Jose Parking eventually won the eminent-domain case on appeal even as the two developments fell through, leaving the Second Street parking lot as among the most underutilized pieces of property downtown. At long last, however, Schlarmann appears to have found a developer he can work with, Barry Swensen, who owns properties throughout downtown San Jose and Santa Cruz. If all goes according to plan, the two men will break ground on a condominium high rise that might rival some of the tallest structures in the city. "We don't know how high or what shape it will be," Schlarmann says.

Integrity

In the early 1980s, the Second Street lot was involved in another process that would eventually conflict not only with Schlarmann's investments but also with the city's desire to develop the Second Street parking lot. Historic preservation activist Bonnie Bamburg asked for and received permission to include the city block where the parking lot is located, as well as the city block where the Improv is located, on the Downtown National Register Commercial Historic District, the first area in San Jose to receive this distinction. The block includes the Bank of America building and a number of two- and three-story Victorian-style structures that date from 1880 to 1930.

It is a sign, perhaps, of how little city officials value historic properties that nobody bothered to outline what an historic designation means with regard to the Second Street properties. As an example of how little attention preservation has been given, the oldest city in California has only one building, the Peralta Adobe, still standing from the 18th century. Even Peralta didn't escape urban renewal: Its western wall was sheared off when a commercial building was literally built on top of it some years ago.

Last November, the San Jose City Council finally adopted guidelines for the Downtown Historic District. Among the recommendations was the stipulation that no new buildings in the historic district should exceed four stories. Schlarmann's proposal would likely miss that mark by more than 10 stories. "It's a massing and scaling issue," says Alex Marthews, executive director of the Preservation Action Council of San Jose. "The essential issue is whether the city will have an historic district that has integrity or one that will be steadily picked apart by short-sighted development. In this case, the central historic district would have a very incongruous tower in the middle of it."

Preservationists, who have had to fight to save such historic structures as the old county courthouse, the First Church of Christ Scientist on the north side of St. James Park and the Jose Theater, where the Improv is now housed, are concerned that if Schlarmann is allowed to build his condominium tower, it will render the guidelines useless—especially since his is the first project to test the guidelines since they were passed last year.

"We're thinking what kind of message this sends," Marthews says. "It will effectively destroy the guidelines."

The City Council already has a poor track record with guidelines it sets for itself. The council set guidelines that only under specific conditions would it allow developers to build residential housing on rapidly diminishing industrial-zoned property. The council caved on the first four developers who asked for waivers.

Tools

Al Schlarmann says economics force him to seek a taller building than what the guidelines hold for the historic district. Unlike the two developments the city was helping to usher in, his project will receive no subsidies. He says he wants to build approximately 200 parking spaces for restaurants and shops to use in addition to four levels of parking for condo owners. He estimates underground parking spaces will cost $30,000 per space while above-ground parking costs $24,000 per space.

"We feel the extra spaces will keep other businesses viable," he says. "If they can't make it, the buildings will go back into disrepair."

Councilmember Cindy Chavez, whose district includes most of downtown, says she's taking a wait-and-see approach to the development. "I'm open to the best and brightest ideas for that location," she says.

Chavez says she likes the idea of a development that doesn't require subsidies. "We've made a lot of public investment in that area," she says. "It's time for the private sector to be a little more open and flexible." Even so, Chavez admits it's strange to ignore the guidelines on the first project to contest them. "Out of the box, we're violating them," she says. "They are an important tool."

Chances are that if Schlarmann obtains funding for his project, city leaders will cave as they have done many times before. He is promising a quality project: "People get very [excited] before they've had a chance to really look at the project and examine all the sides. I don't suppose there's any way to avoid that."

Marthews emphasizes that his organization is not against development. He is simply trying to preserve the feel of a historical neighborhood in a city that has lost nearly all connection to its roots. "We just don't want an unworthy project going in there," he says.


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From the October 6-12, 2004 issue of Metro, Silicon Valley's Weekly Newspaper.

Copyright © Metro Publishing Inc. Metroactive is affiliated with the Boulevards Network.

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